New Service Tax of 14% will Make Food, Travel, Phone Bills Costlier from 1 June

A raise in service tax is also applicable on insurance, telephone bills, air travel and others.

India's Finance Minister Arun Jaitley arrives at the parliament to present the federal budget for the 2015/16, in New Delhi February 28, 2015. Jaitley announced a budget for growth on Saturday, saying the economy was ready to "fly", that the government would boost investment and ordinary people should benefit.

Using cabs and eating in restaurants will cost you more from 1 June, as the government is set to introduce a new service tax rate of 14% on such expenditures.

A raise in service tax, which is also applicable on insurance, telephone bills, air travel and others, was announced by Finance Minister Arun Jaitley in the budget for the financial year 2015-16.

The service tax currently stands at 12.36% including education cess.

"To facilitate a smooth transition to levy of tax on services by both the Centre and the states, the service tax rate is being increased from 12 per cent plus education cesses to 14 per cent," Jaitley said while presenting the budget, reported The Indian Express.

"The education cess and secondary and higher education cess shall be subsumed in the new service tax rate," he added.

The new service tax will also be levied on using credit and debit cards, cabs, cable and DTH services, beauty parlour charges, courier service, laundry services, ordering stock broking, asset management and insurance.

However, the hike in service tax will not be applicable on packaged fruits and vegetables as pre-cooling, ripening, retail packing and labelling of these items.

The proposal to increase the service tax was a step towards rolling out nationwide goods and service tax (GST).

Recently, the government was forced to delay the landmark GST Bill until at least July, after facing strong opposition in the Rajya Sabha.

The Modi government plans to implement the GST from April 2016.

An increase in service tax would lead to a jump in the government's revenues by 24.76% to ₹2.09 lakh crore in 2015-16 compared to a revised estimate of ₹1.68 lakh crore, Business Standard reported.